Indian rupee dives to record low against dollar as foreign investors continue to withdraw their money

The Indian rupee plunged to a record low against the US dollar as attempts to stem the amount of money leaving the sub-continent mis-fired.

India’s central bank on Wednesday placed further restrictions on how much Indian citizens and companies can invest abroad.

But the desperate move to safeguard its flagging economy had little impact, with the rupee falling to 62.03 to the dollar, below its previous low of 61.80 on August 6.

Falling rupee: Overseas investors have pulled £7.4billion out of India's markets since the beginning of June

There are growing fears that the Reserve Bank of India could introduce more drastic capital controls to stop foreign investors and companies with interests in India withdrawing their money.

Leif Eskesen, a leading economist at HSBC, said: ‘The steps taken so far only target residents, but if this raises expectations that they could potentially resort to capital controls targeted at non-residents, that could have adverse near-term implications for capital flows.’

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Overseas investors have pulled £7.4billion out of India’s markets since the beginning of June due to concerns about its slowing economy.
But the latest move has tested the patience of even the most loyal investors, raising the prospect of further outflows.

Jonathan Schissel, a fund manager at Ashburton Investments in Jersey said: ‘They’re coming across as a bit panicky. That’s what is damaging sentiment for investors. Unless things improve, we will probably in all likelihood be withdrawing some weightings from our India positions.’

Concerns that policymakers are losing control over the currency spread to India’s stockmarket, which dropped 4 per cent in its biggest one day decline in almost two years.
Interest on India’s ten year bonds – the cost the government pays to borrow – surged to its highest level since May 2012.